Category Archives: Crude By Rail

Bakken Crude, Crude By Rail, Oil Industry, Pipeline transport

Fewer Bakken oil trains when major new pipeline is operational

Repost from the Chronicle Times, Cherokee, IA
[Editor: Significant quote: “Currently, almost 100% of the 944,000 barrels of crude oil produced daily from western North Dakota oil fields moves out over the U.S. railroad system.”  – RS]

Energy Transfer sells share of Bakken Pipeline

By Loren G. Flaugh, Wednesday, August 31, 2016
Rail shipments to lessen when pipeline operational

(Photo)According to an Energy Transfer Partners, L.P. (ETP) website, ETP and Sunoco Logistics Partners, L.P. announced they had signed an agreement to sell 36.75% of the Bakken Pipeline Project to MarEn Bakken Company, LLC. Marathon Petroleum Corporation and Canada based Enbridge Energy Partners, L.P. jointly own MarEn Bakken.

Marathon Petroleum and Enbridge paid $2 billion in cash for the minority share of the Dakota Access Pipeline (DAPL) and its sister pipeline, the Energy Transfer Crude Oil Pipeline (ETCOP).

The DAPL consists of approximately 1,172 miles of 30-inch diameter pipeline from western North Dakota’s Bakken oil production region to the petroleum storage hub at Patoka, Illinois. The ETCOP is roughly 700 miles of existing, 30-inch diameter pipeline already converted from carrying natural gas to carrying the light sweet Bakken Crude oil. That converted pipeline starts at Patoka and terminates at Nederland, Texas near Houston.

Energy Transfer said the sale to Marathon Petroleum and Enbidge is to close in the 3rd quarter of 2016 and it’s subject to certain closing conditions. ETP will receive $1.2 billion and Sunoco will receive $800 million in cash when closing is finalized.

Energy Transfer said they plan to use the proceeds from the cash sale to pay down debt and to help fund their current growth projects.

Energy Transfer/Sunoco will own 38.25% of the DAPL. MarEn will own 36.75% and Phillips 66 will continue to own the remaining 25%. Energy Transfer will continue to oversee the ongoing construction of the approximately $3.8 billion pipeline project. Once the pipeline becomes operational later this year, Sunoco will be responsible for day-to-day operations of the pipeline.

Energy Transfer will quickly initiate another open season process and solicit additional shippers on its common-carrier crude oil pipeline to increase the daily flow rate from the current design capacity of 450,000 barrels per day to just under 600,000 barrels per day. The tariffs that ETP will assess petroleum companies that ship oil on the pipeline will pay off construction costs and provide revenue for day-to-day operations

A large subsidiary of Marathon Petroleum has already committed to participate in this upcoming open season and will make a long-term commitment to ship a large volume of Bakken crude oil to the Patoka petroleum hub. Enbridge owns crude oil storage tanks at Patoka and existing pipelines that go in to and out of this vital petroleum transshipment hub.

When ETP proposed the DAPL back on June 25, 2014, the pipeline was designed for transporting 320,000 barrels of light sweet Bakken crude oil per day. Energy Transfer said that they would solicit additional shipper interest to increase the daily flow rate. Additionally, Energy Transfer said they were in discussions with Sunoco to seek their participation in a potentially significant equity partnership.

Then on September 22, 2014, Energy Transfer announced that they intended to initiate an Expansion Open Season to acquire additional crude oil transportation services on the DAPL. This Expansion Open Season was successful when additional shippers signed long-term commitments increasing the daily throughput to 450,000 barrels per day.

With the pending ETP open season in the coming weeks, this anticipated flow-rate increase of upwards of 570,000 barrels per day will result in the DAPL moving a substantial volume of the daily crude oil produced from western North Dakota’s Bakken/Three Forks petroleum production areas.

According to the North Dakota Bakken Daily Oil Production News website, the daily production level of Bakken crude oil stood at 994,727 barrels per day as of May 31, 2016. This is a small increase from the previous month. However, both production figures are down significantly from June 30, 2015 when the Bakken oil field was producing at the rate of 1,153,000 barrels per day. The Bakken oil fields had been yielding almost 1,200,000 barrels per day in 2014 when prices for crude oil were much higher than today.

The U. S. Energy Information Administration (EIA) recorded a price for crude oil at $105 per barrel in June of 2013. It was in July of 2014 when oil prices dropped below $100 per barrel. One year ago, in June of 2015, the EIA reported a price per barrel of around $60. Earlier this year, in February, the price per barrel plunged to just above $26 per barrel. Today’s price per barrel is around $40 and still expected to fall more.

The daily production rates for crude oil in the Bakken oil fields are rising and falling right along with the fluctuating prices for crude oil and will continue to due to the current over-supply of crude oil in the world oil markets.

Currently, almost 100% of the 944,000 barrels of crude oil produced daily from western North Dakota oil fields moves out over the U.S. railroad system. That is because there are no significant crude oil pipeline systems originating from the Bakken region currently available for moving this huge volume of light sweet crude oil into the broader U.S. pipeline distribution system.

Once the 600,000 barrel per day DAPL begins commercial operations later this year, it will be the first major pipeline to move Bakken crude oil. However, that still leaves about 400,000 barrels per day for railroad shipment. A 100-car Bakken crude oil unit train can carry about 3,000,000 gallons of oil.

According to North Dakota statistics, Burlington Northern & Santa Fe Railroad (BNSF) hauls out about 75% of the crude oil that leaves the Bakken region. Union Pacific and CSX Corporation are other rail carriers that move Bakken crude oil. Some Bakken crude oil goes north into Canada and is moved east or west to crude oil refineries located as far east as Nova Scotia.

The most recent crude oil unit train derailment happened on June 3, 2016 when a 96-car Union Pacific unit train carrying Bakken crude oil derailed while moving through the Columbia River Gorge near Mosier, Oregon. Fourteen of the tanker cars derailed, ruptured and caught fire. Approximately 42,000 gallons of crude oil spilled. A federal investigation revealed that broken bolts joining two rails caused the accident.

The Iowa Homeland Security and Emergency Management Department tracks how much Bakken crude oil moves through Iowa. According to figures from early 2015, BNSF moves Bakken crude oil through Iowa on one heavily used route through Lyon, Sioux and Plymouth Counties and into eastern Nebraska. Another heavily used BNSF route crosses southern Iowa. When daily North Dakota crude oil production rates peaked in 2014 and 2015, roughly 12 to 18 crude oil unit trains per week used the two BNSF routes.

The Association of American Railroads did a study of U. S. Rail Crude Oil Traffic in November of 2015. Their summary noted; U.S. crude oil production has risen sharply in recent years, with much of the increased output moving by rail. In 2008, U.S. Class I railroads originated 9,500 carloads of crude oil. In 2014, they originated 493,146 carloads, an increase of nearly 5,100 percent. Rail crude oil volumes in 2015 will be lower than in 2014. Additional pipelines will probably be built in the years ahead, but the competitive advantages railroads offer–including flexibility to serve disparate markets–could keep them in the crude oil transportation market long into the future.

Crude By Rail, Local Regulation, Public permitting, Public Safety, Valero Benicia Refinery, Valero Crude By Rail

Benician C. Bart Sullivan sends letter to Cal. Attorney General

By Roger Straw, September 2, 2016
[Editor:  This post originally appeared with an error that has since been corrected.  C. Bart Sullivan is not an attorney.  The error was our own, not that of Mr. Sullivan.  We apologize for our error.  – RS]

Local Benicia engineer C. Bart Sullivan petitions Attorney General Kamala Harris, points out serious flaws in Valero CBR design

On August 9, local Benicia engineer C. Bart Sullivan wrote the following letter asking for help from California Attorney General Kamala Harris.  Sullivan’s comments focus on the lack of adequate safety setbacks and potential catastrophic dangers within Valero’s facility and nearby facilities in the Benicia Industrial Park should the plan be approved.

This approach is highly significant, showing that even if federal law prevents the City of Benicia from denying a permit based on rail impacts (a highly disputed contention), there are nonetheless enough significant and serious flaws in Valero’s onsite engineering designs to allow the City to refuse the permit and deny the project.

Text of Mr. Sullivan’s letter follows.  Mr. Sullivan has allowed the Benicia Independent to reprint this letter with the understanding that it is “his personal opinion, informational only, and is not to be construed as legal advice.”

August 9, 2016

California Attorney General Kamala D. Harris
Office of the Attorney General
1300 “I” Street
Sacramento, CA 95814-2919

RE: Valero – Crude By Rail Project

Dear California Attorney General Harris:

Benicia needs your help. I am deeply concerned about the safety of the Valero Crude by Rail Project and the oral dismissal of your legal advice to the city of Benicia by the city contract attorney, Bradley R. Hogin, Esq.

Based on the fact that Valero is the largest private employer in Benicia, the city staff is in favor of the project, and due to the oral legal advice provided by Mr. Hogin implying the futility of any action by the city, from my perspective, it appears that Benicia City Council will vote to approve the project.

From my personal expertise as an engineer with refinery experience, and based on expert opinions of professional engineers who have reviewed the proposed project design, Valero’s proposed crude-by-rail project design is extremely dangerous. Specifically, the engineering design does not allow for sufficient safety setbacks (the distance between the rail cars and oil storage tanks, etc.) to mitigate the likelihood of a chain reaction explosion within the refinery. Thus, due to the massive explosive potential of each rail car and the close proximity of the rail cars to other explosive fuel sources, it is highly likely that an explosion of only one rail car within the refinery will escalate into larger explosions extending beyond Valero property and into the city of Benicia.

Therefore, because of the lack of safety setbacks and the number of proposed rail cars entering the facility on a daily basis, the likelihood of catastrophic explosions at the refinery in Benicia puts hundreds, if not thousands, of Benicia residents directly in harm’s way. Unfortunately, the city has no way to mitigate this terrible danger, let alone mitigate other safety and health issues such as additional health impacts from the predicted increase in local air pollution.

Valero has categorically asserted that Benicia City Council cannot look to these unmitigable health and safety issues to deny the project due to the law of federal preemption. Based on Valero’s assertion, I wanted to bring comments from Mr. Hogin and Mr. John Flynn, Esq., Valero’s attorney, to your attention.1

In his testimony to the Benicia City Council, Mr. Hogin,  advised that the city had no recourse under federal preemption to deny the project, summarily dismissed your letter of April 14, 2016, and did not provide the city with any legal advice on how to challenge the project under Constitutional law. For example, Mr. Hogin did not provide any legal advice concerning how the proposed project could be challenged under the 10th Amendment or the Dormant Commerce Clause (DCC) using the rational basis test for the legitimate noneconomic purpose of protecting the health and safety of Benicia residents.

For your convenience, the following are recorded oral statements by Mr. Hogin and Mr. Flynn. I am deeply troubled by these statements, which I consider to be biased legal advice given to the Benicia city council April 18, 2016.

During the Benicia City Council meeting, Monday April 18, 2016, Mr. Hogin stated:

“The Attorney General letter really missed the point. The issue here is whether a City can regulate rail impacts indirectly by imposing requirements on a shipper that address rail impacts, as opposed to impacts from the shipper’s facility, and the Attorney General opinion really doesn’t discuss that.

The Attorney General opinion only discusses cases where cities were addressing impacts from a transloading facility that was owned and operated by a private party.

In none of the cases where — that the Attorney General cites were any of the cities addressing rail impacts…”

Moreover, during the same Benicia City Council meeting, Mr. Flynn stated:

“As for the AG’s letter, I’m going to choose my words very carefully because I have a lot of respect for Kamala Harris and I have a lot of respect for her office, but that letter on the issue of preemption is dead wrong. Your attorney — the advice that you’ve been given by your attorney is exactly right. If you follow the advice that’s been given to you by Kamala Harris, you’ll be making a terrible mistake, a terrible legal error.

Somebody has suggested that Valero, because it’s a — it’s a refinery, doesn’t have any standing to ask for a Declaratory Order from the — from the Surface Transportation Board. That, also, is dead wrong.

You don’t have to be a railroad to get a Declaratory Order from the Surface Transportation Board, and that’s been proven on many occasions as a result of the fact that the Surface Transportation Board has, in fact, issued a number of declaratory orders as the result of requests made by nonrail carriers.

Valero is a shipper. A “shipper” is a term of art under federal law. So we do have standing to request that Declaratory Order.” (Emphasis added)

Even though Mr. Hogin briefly mentioned later in his discourse that the city could look to non-rail related impacts to deny the project, the above quoted transcript of the oral arguments do not reflect the serious and biased tone of the legal advice as orally presented to the Benicia City Council. Specifically, the oral presentation by Mr. Hogin implied that any legal recourse would be futile, and that the city of Benicia has no other option but to approve the project.

While the legal advice from both attorneys concerns me greatly, Mr. Hogin’s legal advice seems especially biased toward Valero’s position, and does not seem to be in the best interest of his client, the city of Benicia.

Thus, Mr. Hogin provided legal advice in a manner strongly advocating Valero’s position without formulating a defensible and well thought out argument for the case opposing Valero’s position for the city to consider.

Based on the above, I emphatically urge you and your staff to personally visit the city of Benicia to reiterate your position. I implore you to please help the city of Benicia realize that they have the power to protect their citizens, and without taking your advice they would be making a terrible legal error and would be breaching their duty to the people of Benicia and beyond.

Sincerely,

C. Bart Sullivan, E.E, J.D.

1 REPORTER’S TRANSCRIPT OF RECORDED PROCEEDINGS IN RE VALERO CRUDE BY RAIL PROJECT HEARING AND PUBLIC COMMENTS (http://www.ci.benicia.ca.us/vertical/sites/%7BF991A639-AAED-4E1A-9735-86EA195E2C8D%7D/uploads/City_Council_April_18_2016_Transcript.pdf)
Crude By Rail, Derailment, Emergency planning, Emergency Readiness & Response, Oil spill, Oil trains, State regulation

Washington: New rule requires railroads to show they can handle oil spills

Repost from the Tri-City Herald, Kennewick, WA
[Editor: Significant quote: “…California and Minnesota have implemented similar laws for railroads.”  – RS]

Washington: Railroads must show they can handle oil spills

By the Associated Press, September 1, 2016 2:16 PM

HIGHLIGHTS
Washington’s Department of Ecology has adopted a new rule requiring that railroads shipping oil through the state demonstrate that they can immediately respond to any spills.

FILE - This June 6, 2016, file aerial video image taken from a drone shows crumpled oil tankers lying beside the railroad tracks after a fiery June 3 train derailment that prompted evacuations from the tiny Columbia River Gorge town of Mosier, Ore. Federal investigators on Thursday, June 23, 2016, blamed Union Pacific Railroad for the derailment along the Oregon-Washington border, saying the company failed to properly maintain its track. Preliminary findings on the derailment raise questions about why the company didn't find the broken bolts that triggered the wreck when it inspected the tracks right before the derailment.
FILE – This June 6, 2016, file aerial video image taken from a drone shows crumpled oil tankers lying beside the railroad tracks after a fiery June 3 train derailment that prompted evacuations from the tiny Columbia River Gorge town of Mosier, Ore. Federal investigators on Thursday, June 23, 2016, blamed Union Pacific Railroad for the derailment along the Oregon-Washington border, saying the company failed to properly maintain its track. Preliminary findings on the derailment raise questions about why the company didn’t find the broken bolts that triggered the wreck when it inspected the tracks right before the derailment. Brent Foster AP

OLYMPIA, WASH.  |  Washington’s Department of Ecology has adopted a new rule requiring that railroads shipping oil through the state demonstrate that they can immediately respond to any spills.

The department said Thursday the rule takes effect Oct. 1, and it brings railroads into line with rules for companies moving oil by pipeline and by vessel.

Railroads will have to provide Ecology with contingency plans detailing steps the railroad will take if oil spills or a substantial risk of a spill occurs during transport. Officials say they’ll review each plan and require that they be tested through appropriate drills.

The state says California and Minnesota have implemented similar laws for railroads.

This fall, Washington is also beginning to require that facilities receiving shipments of crude oil by rail notify Ecology, which will share notice of those plans with local first responders.

Crude By Rail, Emergency Readiness & Response, First responder training

None on Kentucky hazmat team got new training for rail oil spills

Repost from the Lexington Herald Leader
[Editor:  I asked a knowledgeable friend about permitting in Kentucky: Was crude oil envisioned for Somerset back before its opening in 2007? Was there a more recent Continental permitting process before they could begin shipping crude by rail? Any environmental impact reports? Are folks in Kentucky opposing this?  Here is my friend’s response: “Long story short: Kentucky is pretty relaxed when it comes to permitting. Whatever business they envisioned at the rail park 10 years ago is what they can do. The area is nonattainment, so no air quality permits were required. All the environmental scrutiny the facility ever got was an EPA-supervised cleanup of the site, which was a former steam locomotive maintenance shop. Did that, got their wastewater discharge permit, and they were off to the races. There won’t be any meaningful opposition. That area has a strongly pro-business, anti-regulation bent. They built the county’s landfill over top of a cave system that feeds into the local drinking water supply and didn’t even bat an eye.”  – RS]

None on Kentucky hazmat team got new training for rail oil spills

By Curtis Tate & Bill Estep, McClatchy Washington Bureau, August 26, 2016 5:59 PM
Continental Refining has begun shipping oil and oil products by rail through the Somerset Rail Park in southern Kentucky.
Continental Refining has begun shipping oil and oil products by rail through the Somerset Rail Park in southern Kentucky. | Continental Refining

WASHINGTON  –  A Kentucky oil train terminal illustrates a persistent gap between the risks posed by increasing volumes of crude oil moving by rail and the training available to local first responders specifically for it.

Continental Refining, which operates a 5,500-barrel-a-day refinery in Somerset, Kentucky, announced this week that it plans to move oil and oil products through the Somerset Rail Park, an $8 million rail-to-truck cargo transfer facility that opened in 2007.

But no one on the 12-county hazardous material team that would respond to an oil spill or fire at the facility has received the training that’s been developed in the past few years for such incidents.

That’s in spite of a $2.6 million federal grant last year to Somerset’s Center for Rural Development to develop training for rural or volunteer firefighters to respond to oil train derailments.

$8 million
Federal funds earmarked to build the Somerset Rail Park

Last year, the U.S. Department of Transportation and Congress tightened safety standards for shipping oil by rail in the wake of a string of fiery derailments across North America. The worst of those killed 47 people in Lac-Mégantic, Quebec, in 2013. Last year alone, there were seven derailments involving oil and three involving ethanol across North America.

Continental declined to respond to questions about the safety of its Somerset operation, including whether the rail cars it uses meet the new federal standards and whether it had notified local emergency responders about the shipments and offered them training.

$2.6 million
Federal grant to the Center for Rural Development for firefighter training

Doug Baker, the chief of the Somerset-Pulaski County Special Response team, said the refinery had a history of working well with the hazmat team and other local first responders.

Continental had not notified him specifically about its shipments to the Somerset Rail Park, Baker said, but the refinery had made an effort in the past to include the hazmat team and fire department in emergency planning.

Baker said the special response team had trained technicians at the refinery and helped develop its safety plan. In case of an oil train fire, he said, his team had access to a supply of firefighting foam in the county and the trucks to pump it.

“We’re as prepared as anyone can be for a railroad derailment,” he said. “The response here, to me, would be as good as any you would find anywhere in the state and maybe the nation.”

47
People killed in the Lac-Mégantic, Quebec, oil train derailment in 2013

Railroads have offered new training opportunities to emergency responders since the Lac-Megantic disaster. Norfolk Southern, which serves the Somerset Rail Park, operates a safety train, a traveling classroom used to educate fire departments.

According to the safety train’s 2016 schedule, the closest it came to Somerset was Knoxville, Tennessee, about 100 miles away, in early August.

Norfolk Southern and other major railroads have also paid for firefighters from across the country to attend an advanced training class at the railroad industry’s testing facility near Pueblo, Colorado.

Baker said no one on his team had participated in the training in Tennessee or Colorado.

Dave Pidgeon, a spokesman for Norfolk Southern, said first responders in Kentucky were welcome to contact the railroad about training opportunities by going to the safety train’s website.

1 million
Barrels of oil a day transported in trains across the U.S. in 2014

At the peak in 2014, about 1 million barrels a day of oil were moving across the country by rail. But because of low oil prices and new pipeline capacity, that number has fallen nearly by half.

Continental declined to specify where it sources its oil, but the refinery is capable of refining the light, sweet crude that’s produced in North Dakota’s Bakken shale region.

According to an Environmental Protection Agency report, Continental’s Somerset refinery processed more than 200,000 gallons of Bakken crude oil recovered from the March 2015 derailment of a BNSF oil train in Galena, Illinois.

IN 2015 ALONE, THERE WERE SEVEN DERAILMENTS INVOLVING OIL AND THREE INVOLVING ETHANOL ACROSS NORTH AMERICA

The shippers of oil products and ethanol are supposed to begin phasing out older, less-protected tank cars in rail transportation starting in January 2018. New cars must be built with thicker shells, better crash protections and thermal blankets to protect from fire exposure. Older cars must be retrofitted with those features.

Depending on the type of product and the risk it poses, the older cars can be used through 2029, with a two-year extension possible if the industry can’t complete the retrofits fast enough.

In a series of stories over two years, McClatchy showed that fire departments across the country lacked the resources and training to deal with derailments of trains carrying millions of gallons of flammable liquids.

McClatchy also used open records laws in more than two dozen states, including Kentucky, to obtain information about large shipments of oil by rail.

In 2014, the federal government required railroads to notify first responders about the shipments. Norfolk Southern sued the Maryland Department of the Environment before it could release the records to McClatchy, but a judge eventually ruled against the railroad.

Estep, of the Lexington Herald-Leader, reported from Somerset, Kentucky.